Food exports from Ukraine and Russia have increased since a landmark July 22 grain deal, but critically needed fertilizer exports from Russia are still down despite being covered by the agreement, with financing and shipping still issues, the United Nations said on Tuesday.
U.N. trade chief Rebeca Grynspan, who leads the team trying to facilitate unimpeded global access to Russian food and fertilizer, said Russia reported a 12% increase in food exports from June to July. But while there has been “important progress,” the U.N. is concerned about fertilizer exports needed by October and November, the latest for the Northern Hemisphere's planting season, she said.
Fertilizers now are three times the price they were before the COVID-19 pandemic hit in early 2020, Grynspan said, adding that, “the crisis of affordability that we have now will be a catastrophic crisis if we don’t solve the problem of fertilizer.”
As an example, she said the sowing season for new crops in West Africa is over and planting was down by a very high percentage because of fertilizer costs.
Grynspan told a U.N. press conference by video from Geneva that the U.N. Food and Agriculture Organization (FAO) reported that food prices declined globally in August for the fifth straight month. But she expressed concern that this decrease has not been seen in domestic markets, and developing countries especially are still struggling with high food prices as well as inflation, currency devaluations and interest rate hikes.
Amir Abdulla, the United Nations coordinator for the deal to ship Ukrainian grain, said 129 fully laden ships carrying over 2.8 million tons of grain have left the three designated Ukrainian Black Sea ports for different countries.
With grain prices dropping, Abdulla said, the U.N. has seen that people who had been hoarding grain to sell at high prices are now putting it on the market in one or two countries. “Hopefully that will bring some of those local prices down,” he said by video from Istanbul.
On July 22, Russia and Ukraine signed separate agreements with Türkiye and the United Nations clearing the way for the export of desperately needed grain and fertilizer, ending a wartime standoff that threatened food security around the globe. The deal expires in November after 120 days and can be renewed.
Abdulla said the U.N. has “very positive messages from Türkiye” that they want grain shipments to continue, “and we are hoping that with their influence, with U.N. mediation efforts ... it won’t really be a matter for discussion.”
Ukraine was one of the world’s largest exporters of wheat, corn and sunflower oil, but Russia’s Feb. 24 invasion of the country and naval blockade of its ports had halted shipments.
Some Ukrainian grain is transported through Europe by rail, road and river, but the prices of vital commodities such as wheat and barley had soared before the grain deal, which U.N. Secretary-General Antonio Guterres called an unprecedented agreement between two parties engaged in a bloody conflict.
Although international sanctions against Russia did not target food and fertilizer exports, the war has disrupted shipments of Russian products because shipping and insurance companies did not want to deal with Russia.
Grynspan, who is secretary general of the U.N. Conference on Trade and Development, said there were “doubts” about U.S. and European Union sanctions and the U.N. has been providing clarifications that food and fertilizers have no sanctions so ships can carry them, insurance can be provided, banks can make transactions, and the vessels can go to European ports.
This involves dealing with the private sector, where the Russian invasion and sanctions had “a chilling effect,” she said, “so this is not like one stroke will solve all the problems.”
Grynspan said the U.N. is undertaking “all efforts” to enable Russian exports of ammonia, a key ingredient of fertilizers, to get to world markets.
The U.N. has proposed that ammonia gas owned by Russian fertilizer producer Uralchem be brought via pipeline to the Russia-Ukraine border. There it would be purchased by U.S.-headquartered commodities trader Trammo, according to the proposal.
Trammo has been approached by the U.N. to assist in this project and is happy to cooperate, it said in an emailed statement.
“The absence from the market of ammonia formerly shipped through Ukraine has caused substantial hardship in countries dependent on that product. We believe that resumption of shipments will help to stabilize fertilizer prices worldwide and to avoid a global food crisis,” Chief Executive Ed Weiner said in the statement.
The pipeline is designed to pump up to 2.5 million tons of ammonia per year.
Grynspan declined to comment on the specifics of the deal and said it was “too early to say” how close an agreement was.
An ammonia deal would give Russia more of a reason to stick to the Ukrainian Black Sea export deal. “By having a key Russian company export through the same Black Sea corridors that the Ukrainian grain is going through stabilizes the arrangement and could lead to a longer-term extension of the agreement,” a Western diplomat told Reuters.
Grynspan was asked to respond to Russian President Vladimir Putin’s statement last week that Russian fertilizers could get to European ports but not to markets in Africa, Asia and Latin America and replied that in the beginning export issues had not been clear. But she said the EU issued a clarification on Aug. 10 and the U.N. is trying to clarify any further questions.
On the issue of insurance, Abulla said war risk insurance has dropped from 2%-3% of the value of the hull of the vessel to 0.5% of hull value because the operation of the shipping corridor from the three Black Sea ports has been effective.
But Grynspan said the normal price is about 0.05% so it’s still very high for the insurance market, and costs need to come down to bring food prices down further.
